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Sunday, July 27, 2014

Korea Needs to Liberalize Its Rice Market

I
realize that I said that my next post was going to be my second
installment of “Super Fun Economic Review” about the Korean
government's increasing hints about depreciating the value of the
Won.

Rest
assured, that post is coming. However, it's taking longer than I had
anticipated. In the meantime, I wanted to upload this post.

Just
today, I read an article
in The Diplomat about Korea's refusal to liberalize its
domestic rice market to international trade. A few days ago, I also
read a very impressive article
about this same topic that was written by Eric
Deok-jin Song who works over at the Korea-based libertarian think
tank, Center for Free Enterprise
(자유경제원).

As the article was written only in Korean, however, I have taken the
liberty of translating the article into English.

I
think that this is a good time to state that I am not affiliated with
the Center for Free Enterprise in any way whatsoever. Furthermore, any mistakes
in the translation are mine and mine alone.

The first two picture files in this post were from the original post, but I have added the other pictures myself.

Is
rice life? How much longer will the taxpayers' money be spent to
subsidize rice? Rice has already been losing its status as the
country's staple food. From 1995 to 2014 whereas rice production
increased about 10%, the amount of rice that has been imported has
increased 8 fold. The only two countries in the world that have not
opened up their rice markets are Korea and the Philippines.
Continuing to subsidize rice is a waste of the taxpayers' money.

The white signboard that the man is carrying reads "쌀은 생명이다," which means "Rice is Life."Image Source

The
Ministry for Food, Agriculture, Forestry and Livestock says, “For
the future of the rice market, the best decision that we have made
was to begin to import rice, but to impose tariffs on imported rice.”

With
the government on one hand that says that the opening up the rice
market can no longer be delayed and opposing farmers on the other
hand claiming that such a move would cause irreversible harm, the
differences between the two sides are sharply contrasted. It should
be noted that Korea made a promise to the international community to
open up its rice market in the Uruguay
Round of multilateral trade talks
in 1994.

By claiming that rice is unique to Koreans, the
Korean rice market has received “preferential treatment” and has
been waived from opening up the market at great cost. What was the
great cost? For failing to open up the market, Korea was obligated
to import up to 51,000 tonnes of rice in 1995. That obligation has
steadily increased and this year, Korea is obligated to import up to
409,000 tonnes of rice this year alone. At the end of this year,
Korea's grace period will come to an end. Korea can no longer afford
to delay opening up the market.

The first two lines above and below the Korean and the Philippines flags say "The only two countries in the world that have not opened their rice markets are Korea and the Philippines."The circles and the text in the middle of those circles say "Rice production has fallen from 4,690,000 tonnes to 4,230,000 tonnes. Korea has had to increase its obligatory rice imports from 50,000 tonnes to 400,000 tonnes. An average Korean's rice consumption has fallen from 532 bowls per year to 336 bowls per year."The last line says, "How much longer will the taxpayers' money be spent to subsidize rice? How much longer will we be forced to import rice? It is time to compete with imported rice."Image Source

Despite having protected the
rice market much more and much longer than any other industry,
Korea's agriculture industry has barely survived. Despite continuous
large-scale investments, Korea's agriculture industry's
competitiveness remains at a standstill. Due to a decline in the
number of farming households, more and more people have begun to
abandon their farms. As a result, only senior citizens and
low-income families continue to live in rural areas, which threatens
to shrink Korea's agriculture industry even further. Although rice
production has increased somewhat, average income has fallen, which
has caused a great income disparity.

Opening up the rice
market will provide our agriculture market with new opportunities.
Korean agricultural products are popular in China. That is because
the Korean brand is considered a trustworthy brand by Chinese
consumers. Opening the rice market will not lead to imported rice
flooding the Korean market but rather an increase in our exports to
overseas markets. Now is the time to increase the rice industry's
competitiveness and to focus on the debate of raising
tariffs.

Korea's agricultural industry stands at a crossroad.
It can either crash as a declining industry tends to do or it can
find ways to become a competitive industry. Using competitiveness as
a springboard, it has to find the right direction in order to become
an advanced agricultural industry. It has to extricate itself from
all of its excessive protections and move away from its
land-intensive production methods in order to pursue more
capital-intensive production methods.

The Confederation of
Farmers Alliance that has long opposed the opening of the rice market
has already begun to engage in all-night sit-ins and other forms of
protests. Instead of engaging in unreasonable protests, they have to
embrace market principles and the entrepreneurial spirit. In order
to transform the industry into a competitive one, and to transform it
from one focused on 공자유전
(耕者有田),
which
is established in Article 121 of the Republic of Korea Constitution
which states that “the State shall endeavor to uphold the notion
that those who till the land will use the land,” to one that is
focused on 경자용전
(經者用田),
which is the notion that those who can manage the land can use the
land.
Furthermore, the regulations and restrictions on the agriculture
industry ought to be abolished.

Only
this effort can lead to an increase in new capital investment that is
needed to increase the industry's competitiveness and establish an
international business that can compete globally.

That large
businesses are always opposed to entering the agriculture industry in
Korea is worrisome. Dongbu Group, which had built a state-of-the-art
facilities in a tomato production facility but faced opposition from
farmers groups and had no choice but to discard millions of tomatoes.
Dongbu Group had even signed a contract to export domestically
produced tomatoes to Japan. However, the farmers and the farmers
groups opposed this. After having lost millions, Dongbu Group
withdrew from the tomato business.

Toyota, the symbol of
Japanese manufacturing, on the other hand, has built and is
strengthening their agricultural productivity. The agriculture
business is gaining strength to becoming a vital business in the
future.

Whenever a free trade agreement has been signed be it
with Chile, the United States, the European Union, ASEAN, Australia,
or Canada, the farmers have never failed to angrily protest. Yet
even with the importing of Chilean grapes, domestic grape production
has increased. The beef market has been opened but Korea's beef
industry has not weakened. It is the same with other agricultural
goods. The farmers have begun to improve their quality, scientific
methods, and have begun to become more competitive.

Although
competition and opening up markets can threaten domestic businesses
initially, it has in fact strengthened the domestic
industry.

Agricultural products have increased in value and
improved their income levels. People have to accept this new change
and farmers must stop thinking of themselves as farmers and instead
think of themselves as “farmakers” and “farmarkets.” Farmers
have to accept the entrepreneurial spirit that can only exist within
capitalism and only this can ensure the successful development of a
competitive agricultural industry.

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About Me

My name is John Lee and I am currently the editor and writer behind the independently-run blog, “The Korean Foreigner.”

Recently, I have also begun to work as a freelance copy editor for Freedom Factory. Here, with permission from Freedom Factory, I shall post English translations of Freedom Factory’s weekly newsletter “Freedom Voice.”